co product costing detailed trng

Download Co product costing detailed trng

Post on 14-Jul-2015




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    Product Costing

  • **Product Cost Controlling - Benefits

  • **What can Cost Object Controlling do for me?What actual costs did we incur in our area in the current period?What costs were we expecting based on the quantities manufactured?Are some product groups performing significantly better than others?What is causing these variances?What are the scrap costs of our new line?Did continuous improvements show cost effects?

  • **Product Controlling by OrderWhen to Use?Very flexible production environmentHigh set-up costsFull cost tracking neededControlling by individual production lots neededExample: Order related production

  • **Product Controlling by PeriodWhen to Use?High volume productionStable and continuous productionNo individual lot oriented controlling neededCollecting costs on product cost collectorsExample: Repetitive production

  • **Product Cost by Sales OrderWhen to Use?Cost and revenues collected by sales order irrespective of manufacturing scenarioCollecting special sales costs on sales orderTracking Funds committedCalculating Work in process and Reserves with results AnalysisExample: Controlling complex Make-to-Order Production

  • **Product Cost Controlling - Components

  • ** Product Cost Planning PC- Planning stageQuantity StructureQuantity StructurePlan Overhead rates:Energy= Rs.10 / hrRunning= Rs.80 / hrValue StructureValue Structure RoutingBOM +Men Cost = Rs. 20 per kgStandard BOM to give standard material costStandard Routingto give standard overhead consumption quantity Standard Overhead ratesStandard Material consumptioncostStandard Overhead costsStandard cost of Manufactured goods includes the planned cost of Raw Material and Planned cost of Overheads

  • ** Cost - Object Controlling PC - Actual stageCost centers Production OperationFinancialAccountingActivitiesOverhead expenses Cost SheetOverhead costs posted to budget cost centers Overhead costs re-allocated in between cost centers Overhead costs allocated from Cost Centers to Production Operations using two methodsStandard cost of FGOverhead costs allocated to Finished Goods at standard overhead rates VariancesOverhead variance are accounted along with Production varianceFinished Goods

  • **Production Order: Process Chain

  • **Allocation of Overhead Costs

  • **Revaluation of Activities With Actual Prices

  • **Overhead Surcharges

  • **Period-End Closing: Work in Process

  • **WIP Calculation Using Actual CostsWIPMaterial: P-100Settlement using posting rules8001,2004002,4001,0001,400MaterialProductionOverheadPlant activityActual Costs-1,400

  • **Posting of Work in Process

  • **Period-End Closing: Variances

  • **Variance Analysis

  • **Period-End Closing: Settlement

  • **Settling the Order to the MaterialRSStandard price controlVMoving averageprice controlStockPrice difference2,000400Plant activity2,400Warehousestock?Quantity in stock =10Quantity in stock =1MMFIFINANCIAL ACCOUNTINGStockPrice difference2,400Plant activity2,400FIFINANCIAL ACCOUNTINGCO-CO-PCPCMaterial: T-F100Quantity produced: 10Actual Costs 2,400,-Actual Costs 2,400,-Stock Change -2,000,-Stock Change -2,000,-Variances 400,-Variances 400,-Actual CostsCO-PCProduction OrderStockPrice difference2,040360Plant activity2,400FIFINANCIAL ACCOUNTING

  • **PA Transfer Structure

  • **Information System: ContentsStructure of the information system Overview standard reports for effective controlling

  • **CO-PC Report Trees

  • **Summarized Analysis - Product Drill Down

  • **Drilldown Reporting - Example

  • **Order Summarization Through Classification

  • **Thank You . . .

    Evaluate the effectiveness of your production system. - set meaningful standards to measure performance - use variance analysis to compare - report by plant, product group, product or even orderStrategic decisions - (primary) cost component split, cost component splits by organizational unit - scrap costs, full integration of Activity Based CostingInventory valuation - alternative valuations (legal, group, profit center) - three parallel currencies - standard costs - actual costs (will be provided in a future release)Semi-finished and finished goods valuation - standard prices provided by cost estimates - creation of alternative cost estimates as closing activities for balance sheet purposesValue Work-in-Process at the close of a periodProvisions for losses - used in a make-to-order environment - update balance sheet and profit-and-loss statements accordingly

    The Product Cost by Sales Order component is recommended for complex make-to-order environments.You can use the Product Cost by Sales Order component in the following situations:When you are manufacturing in-house with reference to a sales order.When you are purchasing products with reference to a sales order and reselling them to your customers.When you are providing services whose costs are assigned to a sales order.This component allows you to do the following:Calculate and analyze planned costs and actual costs by sales order itemCalculate and analyze planned revenues and actual revenues by sales order itemCalculate the value of your inventories of finished and unfinished productsCreate reserves automatically Transfer data to Financial Accounting (FI)Transfer data to Profitability Analysis (CO-PA)Transfer data to Profit Center Accounting (EC-PCA)

    In Cost Object Controlling, the costs incurred in the production of a product or service are collected on a cost object (such as a production order). Which cost object is used depends on your controlling requirements. It may be a sales order, a production order, a process order or a production cost collector. Cost Object Controlling is used to calculate work in process, scrap costs, and variances at period close.

    In standard cost allocation, direct costs are assigned from the preceding components directly to the cost objects. Overhead is assigned to cost centers according to areas of responsibility.Overhead is allocated from cost centers to cost objects by means of various allocation procedures, such as surcharges, assessment, and activity allocation. This allocation often does not accurately reflect the source of the overhead. Percentage overhead is applied proportionately to the direct costs, which can produce a misleading reflection of the product costs and thus lead to incorrect decisions being made.Activity-Based Costing enables you to allocate the overhead from cost centers to processes and assign the overhead to cost objects according to the process usage at source level.The procedure is as follows:Identify the business processes that create significant overheadAssign costs to processes via resource driversDefine cost drivers to allocate the process costs to the cost objects according to their sourceThe process chain shows step by step the manufacturing process using production orders. We will focus on the highlighted steps in this section of event based posting for products.An order request may come from SOP as described in the section on plan integration. You can transfer data from SOP to the production plan. Plan orders can be generated in MRP and then converted to production orders. An order request could also be based on a business request from outside the system. During the MRP run, the system will also check the availability of the necessary semi-finished goods. If there are not enough materials available, the system may create additional plan orders for them, which can be converted to production orders, purchase requisitions, or purchase orders.When an order is created, a preliminary cost estimate is also created (although not always, such as in repetitive manufacturing) to calculate the planned costs for the order. The planned costs are updated whenever the order is changed.When the order is released, actual costs can be assigned to the order. Actual costs are incurred when materials are withdrawn from stock and issued against the order and when confirmations documenting the consumption of activity types are created. Primary costs can be posted directly from other system components to the production order. Shop papers are printed for the shop floor.After finishing the production process, the goods are delivered to stock. You may decide to do partial deliveries at any time during the production process.Overhead costs can be allocated to cost objects in three different ways.With overhead surcharges, you can allocate overhead costs in a very simple way by using costing sheets with predefined percentage-based or quantity-based overhead rates.You can allocate activity types and processes directly to the respective cost objects. In this case, you allocate actual quantities to the cost objects that are valuated with a planned price.With a process template, you can allocate process quantities from business processes to cost objects.The activity prices you calculate during planning are based on planned costs and planned activities. They are also initially used for valuing actual activities.In actual activity price calculation, the system calculates the activity prices for activity types iteratively using the actual costs debited to the cost center and the actual activity consumption of the cost center. This process includes all activity relationships between cost centers, business processes and cost objects.After calculating the actual activity prices, you can revalue the actual activities using the actual activity prices. The revaluation of the actual activities at actual activity prices fully credits the sending cost center and debits the rece